Super in a volatile environment

What are your options for securing your retirement?
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In brief

  • A knee-jerk reaction to short-term stockmarket fluctuations is a bad idea.
  • Find out the approximate mix of assets your money is invested in; most funds offer a range of investment options.

After four years of annual growth ranging from 14% to 27%, Australian shares have declined in value in 2008. In fact, by June 5, the value of the S&P/ASX 200 index had fallen by more than 12% this year. International shares fell in value too, following turmoil in world financial markets, talk of a recession in the US, and the global ‘credit crunch’. This is unwelcome news for the 90% of working Australians with their retirement savings in superannuation funds; much of the value of most people’s accounts is tied to domestic and international sharemarket performance.

Not surprisingly, there’s renewed interest in superannuation among CHOICE members — particularly those within a decade or so of retirement. People are wondering whether they’re in suitable investments, if they should shift money from shares to a safer haven, such as cash deposits, and how they should manage risk. They’re also asking how much super they’ll need for a comfortable retirement and even whether super is still the best place for their savings, given all the turmoil in financial markets.

CHOICE's verdict on super

Given the uncertainty in financial markets, many are asking if super is still the best place for retirement savings. The answer, from a range of financial industry experts CHOICE contacted, is a resounding yes. Essentially, superannuation is a way to invest in the same things as you’d invest in outside super, while paying less tax. You might have had the same losses outside super — or even worse — after tax. Superannuation isn’t tax-free, but it compares favourably to the alternatives.

Please note: this information was current as of May 2008 but is still a useful guide to today's market. For more recent information, see our article on Future-proof your super 2012.



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